The Infrastructure Investment and Jobs Act (HR 3684) puts cryptocurrencies in the spotlight, with Congress and the Internal Revenue Service (IRS) hoping to collect huge amounts of money in taxes. This reporting regime is expected to generate a staggering $ 28 billion over the next ten years. No other provision in this huge, recently enacted federal law is supposed to produce tax dollars that come close. If you don’t think that means the IRS is coming for your cryptocurrency in a big way and that Congress is working hard to make it easy, think again.
The crypto community was outraged when the measure was first proposed and tried to strongly oppose it. That effort resulted in some reductions, but the provisions were enacted anyway. Some people keep talking about a repeal effort, but that could prove a tough sell when the $ 28 billion that the Biden administration might need is at stake. As promulgated, Form 1099 and other reporting standards do not go into effect until December 31, 2023. Still, since Form 1099 reports are done in January for the prior year. That means 2023 will be a great fiscal year.
And with 2022 just around the corner and 2021 tax returns due shortly after, it’s a good time to get your tax affairs in order. The new key questions are if you are a broker, and who is. And how will these burdensome reporting standards be applied? With possible civil and even criminal penalties, you can bet that most exchanges, and others who may have doubts as to whether they are brokers subject to the new law, will resolve any doubts in favor of the statement. Surprisingly, what exactly constitutes being involved in a trade or business can be an open question as well.
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